May 23, 2011 / 5:57 PM / 8 years ago

Blockbuster Canada seeks to stay open post-U.S. sale

The Blockbuster movie rental store is open for business in the Denver suburb of Broomfield, Colorado April 6, 2011. REUTERS/Rick Wilking

NEW YORK (Reuters) - Blockbuster Inc’s BLOAQ.PK Canadian unit is seeking protection from a New York bankruptcy court in a bid to keep its stores open while the U.S. movie rental chain figures out its future under Dish Network Corp.

Blockbuster Canada Co, which operates 400 stores in Canada, filed a Chapter 15 petition in U.S. Bankruptcy Court in Manhattan. The move comes on the heels of an attempt by its U.S. parent, which Dish bought in April for $320 million, to void the agreement that lets it use the Blockbuster name.

“Blockbuster Canada intends to vigorously contest the rejection motion,” the company said in court papers on Friday.

The U.S. parent went bankrupt as it faced increasing competition from Netflix (NFLX.O) and other movie rental services. It had 90 days after the sale to Dish to determine which leases to keep or reject, and asked a court for permission to end its trademark licensing agreement with Blockbuster Canada.

But the Canadian unit argues that the move would violate the terms of a Canadian insolvency proceeding under which a receiver has been put in place to help preserve the company’s assets.

“Without the relief ... the receiver would not be able to ensure the fair and efficient administration of the Canadian proceedings in a manner that protects the interests of all of Blockbuster Canada’s creditors,” it said in court filings.

A lawyer for Blockbuster Inc was not immediately available to comment on the court filing.

Reporting by Nick Brown; Editing by Richard Chang

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